How Long Will You Need to Keep Working?

Ignore the gloom-and-doomers and make your own retirement forecast

With the U.S. unemployment rate stuck in the 8 percent range, you’re probably grateful to have a job if you’re in your 50s or 60s. These days, it takes a little over one year, on average, for people 55 and older to find work.

Nevertheless, there’s a pretty good chance that you’re wondering: How many years do I have to keep this up? When will I be able to stop working or at least shift into part-time work? Will I ever be able to call it quits?

In the Wells Fargo & Company Retirement Survey last November, 25 percent of middle-class Americans said they’ll “need to work until at least age 80” to live comfortably in retirement (age 80 is fairly close to the average life expectancy, so this expectation seems a little absurd). A couple of weeks ago, the Society of Actuaries released a study saying that 35 percent of pre-retirees don’t expect to ever leave the workforce, up from 29 percent in 2009.

Behind the Dreary Retirement Predictions

Some of this despondency is understandable.

After all, most workers with 401(k) plans saw their accounts sapped by the financial crisis, and fewer and fewer private employers offer guaranteed pensions anymore.

Americans are also living longer, which means they need to make their money last for more years than in the past. In 1970, a 65-year-old could expect to live another 15 years, on average, to 80. Today, based on current projections, the average 65-year-old will live to 85; one in four will celebrate their 90th birthday.

“It would be comforting from a public policy standpoint to assume that merely working to age 70 would be a panacea to the significant challenges of assuring retirement income adequacy, but this may be a particularly risky strategy, especially for the vulnerable group of low-income workers,” writes Jack VanDerhei, EBRI research director, in his group’s report.

The EBRI folks pooh-pooh a recent, much-publicized report from the Boston College Center for Retirement Research, which estimated that 86 percent of U.S. households will be financially prepared for retirement by age 70.

There’s some anecdotal evidence that more companies are hiring people 65 and older, which is comforting if you need to or want to keep working that long. Today, 18.6 percent of Americans 65 and older are in the labor force, a pretty big jump from 13 percent a decade ago.

“Older workers are perceived as being reliable and having a very good work ethic,” Jackie James, director of research at Boston College’s Sloan Center on Aging Work, recently said in a Christian Science Monitor article headlined “The Silver-Collar Economy.” Get this: According to that story, the median age of the 48 employees at Vita Needle Company in Needham, Mass., is 73.

When Americans Are Really Retiring

But here’s a little secret: Many Americans are retiring long before age 70.

In fact, the median age of retirement in America today is 61. A full 45 percent of the nation’s oldest boomers have already retired, according to a recent GfK Custom Research North America survey commissioned by MetLife Mature Market Institute.

Working in retirement is also less common than you may think. Although 70 percent of current workers expect to hold full-time or part-time jobs in retirement (I know, it’s hard to reconcile the notion of having a full-time job while being retired), just 14 percent of current retirees do. I suspect the percentage is low for three reasons: Once people stop working full-time, they’re beat; health and cognitive problems prevent some retirees from working at all; and many employers aren’t interested in hiring people in their late 60s or older.

Your Own Retirement Date

So here’s the truth: Unless your employer has a forced retirement date, no one can tell for sure when you’ll quit working.

It all depends on how much you’ve saved and will continue to save until and during retirement, as well as your health, future investment returns, desire to keep pulling down a paycheck and your ability to find work.

My advice: Work with a financial adviser to draw up potential scenarios and start running your numbers in a retirement estimator calculator, like the Ballpark E$timate from the Employee Benefit Research Institute.

Then, when you near the age you’d like to retire, run the numbers again.

If you’re on track, ignore the gloomsters and begin the transition to retirement when you want, the way you want.

Richard Eisenberg is the Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and Managing Editor for the site. He is the author of How to Avoid a Mid-Life Financial Crisis and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch.@richeis315